Malaysia shift on affirmative action angers minorities

The Malaysian government's new measures to benefit the Malay majority are angering the multi-ethnic nation's other races and raising fears they could accelerate a "brain drain" of talent heading overseas.

But he reversed course this month with a slate of new perks to placate conservatives in his Malay ruling party who are upset over a weakened mandate he won in May elections in which minorities continued to snub Najib.

The move has angered non-Malays who complain of second-class status and led to accusations that Najib reneged on a promise of racial inclusiveness.

"Of course, I am very disappointed," said H.Y. Chong, an ethnic Chinese lawyer.

Chong decided after the Malay-led 56-year-old coalition government retained power in May that she would emigrate to neighbouring Singapore, joining a flow of educated Chinese and Indians that economists say threatens Malaysia's competitiveness.

"This proves Prime Minister Najib is further sidelining the non-bumiputra," she said.

Muslim Malays and smaller indigenous groups -- known as "bumiputra", or "sons of the soil" --- make up more than 60 percent of Malaysia's 28 million people.

Under the ruling United Malays National Organisation (UMNO), bumiputra have enjoyed quotas in university placements, housing, and government jobs and contracts since the 1970s to prevent business-savvy Chinese from completely dominating the economy.

Chinese make up a quarter of the population. Ethnic Indians comprise about eight percent.

The policies are credited with helping create a Malay middle class and maintaining harmony despite tensions.

But critics say they have become a millstone in a competitive global economy and are abused by the Malay elite.

"This will only enhance the brain drain, including in the Malay community, as this policy is geared for the UMNO elite," she said.

The measures announced on September 14 include $3 billion to increase Malay corporate equity stakes, millions more to incubate entrepreneurs, and call on state companies to award more projects to Malay-owned firms.

Najib -- whose father Abdul Razak Hussein, Malaysia's second prime minister, launched the original system four decades ago after race riots -- said Malays still need help, noting Chinese out-earn them by 40 percent.

'Delicate balancing act'

"This is always a delicate balancing (act) in Malaysia," Najib said in a televised interview at the weekend.

"My helping the bumiputra doesn't mean that we will exclude the others."

It comes at a tense time for race relations, however.

Facing ebbing support for the UMNO-dominated coalition that has ruled tightly since independence in 1957, Najib had earlier launched campaigns for racial inclusiveness and reduced government interference in the economy.

But Chinese voted in record numbers for a multi-ethnic opposition advocating an end to race bias.

Analysts warn Najib is now under heightened pressure within UMNO to abandon racial unity and focus on the Malay base.

Opposition leader Anwar Ibrahim denounced Najib's move to once again wave the bumiputra flag, telling Time magazine it would cause Malaysia to "lose competitiveness because of the brain drain".

The World Bank said in 2011 that about 20 percent of Malaysians with a tertiary education leave the country, mostly Chinese, with perceived "social injustice" a key driver.

It "conservatively" estimated more than one million of Malaysia's best and brightest were working abroad.

Under UMNO the economy blossomed over the decades but concerns over a growing wealth gap are fuelling calls for affirmative action that is colour-blind.

The bottom 40 percent of households earned an average 1,847 ringgit ($577) per month in 2012, one-seventh of what the top 20 percent made, government figures show. Many non-Malays are among those struggling to afford housing and other basics.

Even the meek Chinese and Indian parties within the ruling coalition -- which usually toe UMNO's line -- have raised eyebrows at Najib's bumiputra push.

Ethnic Indians are stuck in a "vicious cycle" of economic marginalisation and urgently need "strong affirmative action" of their own, said S. Subramaniam, deputy president of the Malaysian Indian Congress.

The policy shift also could send the wrong message to markets seeking continuity at an uncertain time, said Shankaran Nambiar of the Malaysian Institute of Economic Research.

Malaysia's economy has largely weathered the global slowdown.

But Fitch ratings agency in July lowered its Malaysia outlook to negative over expected slower growth, soaring debt and dwindling prospects for economic reform.

A feared global pull-out of funds from emerging markets in favour of recovering developed economies also looms.

"This could be confusing to the market," Nambiar said of the new steps.